Prescription drugs have become an increasingly important component of mental health treatment and the costs of psychotropic drugs have increased rapidly in recent years. However, there are major gaps in our knowledge about the economics of psychotropic drug treatment. This Mentored Research Scientist Development Award would allow Dr. Haiden Huskamp, a health economist with expertise in mental health policy and economic institutions, to supplement her economic tools with the knowledge and skills needed to conduct clinically-relevant and policy-significant research on the economics of prescription drugs used in the treatment of mental illnesses. The specific aims of this career development proposal are to: 1) develop a greater understanding of clinical decision-making related to the use of psychotropic drugs; 2) acquire basic knowledge of psychopharmacology; and 3) expand knowledge of the important economic institutions influencing the prescription drug market. In this undertaking, Dr. Huskamp will be guided by her sponsor, Richard Frank, PhD, and co-sponsors, Andrew Nierenberg, MD, and Ernst Berndt, PhD. Her career development plan includes guided study with Dr. Nierenberg on clinical issues related to treatment decision-making and Drs. Berndt and Frank on economic institutions of the pharmaceutical market, as well as coursework and participation in psychopharmacological "Grand Rounds," relevant seminar series, and professional meetings. Dr. Huskamp will use the knowledge and skills developed through these career development activities to conduct three research projects. The first project examines the effect of generic entry in the class of selective serotonin reuptake inhibitors (SSRls) on utilization patterns, costs, and market share among antidepressants as well as the competitive response of brand antidepressant manufacturers with respect to drug prices and promotional spending. The second project assesses the economic incentives created by three-tier drug formularies and how these arrangements affect costs, utilization patterns, and adherence to treatment guidelines in a non-elderly population. This project includes an economic welfare analysis of the tradeoffs associated with restrictive formularies. The third project examines the effect of a three-tier formulary on psychotropic drug costs and utilization patterns in a retiree population and explores the impact of formularies on the mental health costs of adding a prescription drug benefit to Medicare and on access to appropriate psychotropic drug treatment under such a benefit. The proposed plan of career development will provide Dr. Huskamp the training, mentoring, time and resources to develop the skills that will put her in a position to lead independent research on the economics of pharmaceutical treatment for mental illnesses.